November 1, 2006
08:00 CET
Rautaruukki Corporation Interim report January-September 2006
Rautaruukki Oyj Stock Exchange Release 1 November 2006 at 9.00
This Interim Report has been prepared in accordance with IAS 34 in conformity
with the accounting policies published in the financial statements.
Net sales and result for January-September 2006
(comparative figures for January-September 2005)
Consolidated net sales in January-September 2006 were EUR 2,669 million (2,764).
Net sales decreased by 3 per cent. Comparative net sales in January-September
2006 totalled EUR 2,502 million (2,314), up 8 per cent thanks to the
acquisitions that were made and the good sales trend of the solutions
businesses. The comparable net sales figure does not include Oy Ovako Ab, which
was removed from financial reporting as from 1 May 2005, or the Nordic
reinforcing steel business, which was removed on 1 August 2006.
Demand in the construction industry has remained buoyant and deliveries of
integrated systems have accounted for an increased share of Rautaruukki's sales.
The good order books of customer industries have also boosted Rautaruukki's
deliveries to the engineering industry. Demand for standard and special steel
products in the most important customer industries has held up well. The
solutions businesses accounted for 36 per cent of net sales in the report period
(27). On a like-for-like basis, the figure was 38 per cent (30). Deliveries of
steel products declined by 19 per cent compared with the same period a year
earlier. Comparable delivery volumes declined by 4 per cent. Prices of steel
products rose further in the third quarter. Average prices in January-September
were on a par with the same period a year earlier.
Net sales derived from the core market areas increased to 78 per cent of total
net sales (70), with 31 per cent coming from Finland (29), 32 per cent from the
other Nordic countries (30) and 15 per cent from central eastern Europe (11).
The proportion coming from the rest of Europe fell to 20 per cent (27) and other
countries made up 2 per cent of net sales (3).
Operating profit for the report period was EUR 362 million (495). Comparable
operating profit was EUR 348 million (422). Higher costs of raw materials used
in steel manufacture cut into operating profit. The share of the Group's
operating profit attributable to the solutions businesses rose to 39 per cent
(28). Foreign exchange differences included in operating profit were EUR 8
million negative (+12). The average exchange rate of the US dollar strengthened
by about 2 per cent compared with the same period of 2005. The total effect of
the US dollar on consolidated operating profit, including exchange rate changes
and hedging, was approximately EUR 24 million negative compared with the same
period a year ago. The costs of equity bonus schemes booked to the report period
came to about EUR 15 million (28).
Net financial expenses amounted to EUR 19 million (24). Net interest expenses
were EUR 16 million (24).
The share of associated companies' profit was EUR 35 million (20), of which
Ovako accounted for EUR 32 million (17). In the third quarter, the share of
Ovako's profit was EUR 6 million, which is included in the capital gain of about
EUR 100 million that will be booked on the Ovako shares.
The result before taxes was EUR 378 million (491).
The Group's taxes amounted to EUR 89 million, including an increase in deferred
tax of EUR 11 million. In the same period of last year, the Group's taxes were
EUR 130 million, including a decrease in deferred taxes of EUR 11 million.
Net profit for the report period was EUR 288 million (362).
Diluted earnings per share were EUR 2,09 (2.64).
The return on capital employed over the past twelve months was 26.2 per cent
(35.7) and the return on equity was 25.3 per cent (38.4).
Balance sheet
The Group's total assets at the end of September stood at EUR 2,785 million
(2,694). Total assets increased by EUR 91 million from the end of September of
last year and by EUR 84 million from the end of 2005. OOO Ventall, which was
purchased in June, accounted for EUR 148 million of total assets at the
acquisition date.
Cash flow and financing
Cash flow from operations was EUR 205 million (461) and cash flow after
investments was EUR 143 million (380). The main factors affecting the change in
cash flows in the first part of the year were the dividend payout of EUR 191
million, tax arrears for 2005 of EUR 67 million and the EUR 99 million paid for
acquiring Ventall. The net effect in the Group's cash and cash equivalents of
divesting the Nordic reinforcing steel business is about EUR 105 million of
which EUR 15 million will be received after the reporting period.
Interest-bearing net debt at the end of September totalled EUR 410 million
(477). At the end of 2005, interest-bearing net debt amounted to EUR 341
million. In January-September, working capital increased by EUR 95 million (57),
due mainly to the increase in trade receivables.
The equity ratio was 59.5 per cent (52.3) and the gearing ratio 25.3 per cent
(34.1). At the end of September the Group's liquid funds amounted to EUR 38
million and it had a total of EUR 300 million of committed unused revolving
credit facilities with banks. Shareholders' equity stood at EUR 1,619 million at
the end of September (1,399), or EUR 11.85 per share (10.27). Total dividends of
EUR 191 million that were declared by a resolution of the Annual General Meeting
held in March were paid out on 4 April 2006.
Personnel
The average number of personnel employed by the Group in the January-September
period was 13,063 (11,800) people. At the end of September the total number of
employees was 13,129 (11,086). The change in the number of employees was an
increase of 2,043 people. The increase in personnel strength resulting from the
acquisitions carried out by the end of September 2006 was about 2,200 employees.
The divestment of the steel reinforcement business resulted in a decrease in
personnel of 749 employees. In 2005, 1,900 Rautaruukki staff transferred to the
employ of Ovako and 1,600 people were added to the Group payroll via
acquisitions.
Structural changes in the Group
The acquisitions made in the report period rounded out Rautaruukki's
capabilities for carrying out integrated deliveries to the construction industry
and strengthened the company's project know-how.
The acquisition of PPTH Steelmanagement Oy, the leading steel constructor in the
Nordic countries, was seen to completion in January 2006. The deal raised
Rautaruukki's holding in the company from 20 per cent to 100 per cent. The
shares were bought for a price of about EUR 7 million. As part of the deal,
Rautaruukki assumed EUR 24 million of interest-bearing liabilities. PPTH was
included in Rautaruukki's consolidated financial statements as from 1 January
2006.
The purchase of the Slovak steel constructor Steel-Mont a.s. was completed in
March. The shares were bought for a price of about EUR 10 million. The company
was debt-free. Steel-Mont was consolidated within Rautaruukki's accounts as from
1 April 2006.
In May, Rautaruukki purchased AZST-Kolor CJSC, which operates a colour coating
line in Ukraine. The shares were bought for a price of EUR 5 million. The
company was debt-free. AZST-Kolor was consolidated within Rautaruukki's accounts
as from 1 June 2006. The acquisition means that Rautaruukki has a competitive
source of ensuring its delivery reliability and the availability of high-quality
raw materials, especially in Russia and Ukraine.
In June, Rautaruukki completed the acquisition of the Russian steel constructor
OOO Ventall, thereby strengthening the Group's position in the fast-growing
Russian market. Ventall was included in Rautaruukki's consolidated financial
statements as from 30 June 2006. The shares were bought for a price of EUR 99
million. The company was debt-free. Under the terms of the agreement, a
provision for a possible additional purchase price which is dependent on
earnings in 2006 and is a maximum of EUR 27.5 million was recorded on the
acquisition cost. The company brings Rautaruukki a strong position in Russia's
growing construction market as well as a local manufacturing presence within
steel structures and sandwich panels.
The disengagement from the manufacture of long steel products moved ahead in the
report period. The divestment of long steel products will generate cash flow and
free up resources that can be invested in profitable growth in the solutions
businesses, particularly in central eastern Europe and Russia.
In July, Rautaruukki Corporation, AB SKF and Wärtsilä Corporation signed an
agreement on the sale of the operating companies owned by Oy Ovako Ab to a
company owned by Hombergh Holdings BV's shareholders, WP de Pundert Ventures BV
and Pampus Industrie Beteiligungen GmbH & Co. KG. Rautaruukki's holding in Ovako
is 47 per cent and the company's proportion of the purchase price for the shares
is EUR 311 million. In October, Rautaruukki announced that the regulatory
approvals connected with the divestment of Oy Ovako Ab were still being
processed and that the deal was expected to close during the latter part of
2006. The tax-free capital gain on the transaction and the share of Oy Ovako
Ab's result generated after 30 June 2006 will furthermore be stated as part of
the result of associate companies, which is estimated to total about EUR 100
million.
The sale of the Nordic reinforcing steel business to BT Norway AS closed in
August. The steel reinforcing business has been part of the Ruukki Metals
division and it included the Fundia Armeringsstål AS melt shop and rolling mill
in Mo i Rana, Norway, and the companies specialised in steel reinforcement
prefabrication and distribution: Fundia Betoniteräkset Oy in Finland; Fundia
Armering AB in Sweden; Fundia Armering AS in Norway and Fundia Armering A/S in
Denmark. The purchase price was about EUR 125 million, including the dividend
paid to Rautaruukki. The purchase price corresponds to the book value of the
companies sold.
Ruukki Metals will concentrate on selling special products in the markets of
central and southern Europe, and will develop distribution channels that support
this. As part of the development of the business model, Rautaruukki sold the
steel service centre business which is located in Duisburg, Germany, and mainly
prefabricates strip products as well as the property, plant and equipment and
inventories connected with the business. The steel service centre and the
approximately 75 people on its payroll were transferred to the purchaser's
employ on 1 September 2006.
Capital expenditure
Investments in tangible and intangible assets in January-September totalled EUR
90 million (69). Disposals of property, plant and equipment during the report
period amounted to EUR 15 million (10). Capital expenditure on the replacement
of production equipment in 2006 is estimated to come to about EUR 80 million and
outlays on special products and expanding processing capacity will be about EUR
60 million.
In January-September, EUR 120 million was spent on acquisitions. The
acquisitions increased the Group's interest-bearing net debt by EUR 27 million.
Via the acquisitions, property, plant and equipment increased by EUR 63 million,
working capital by EUR 14 million and goodwill by EUR 99 million.
In the report period, it was decided to launch investment projects in Ukraine
and Romania requiring an outlay of about EUR 50 million. When the investments
are completed, Rautaruukki will be able to increase significantly its deliveries
of components and integrated solutions for commercial and industrial
construction, thereby expanding its services to customers in Ukraine, Romania
and Bulgaria.
Shares and share capital
The trade volume of the Rautaruukki Corporation share on the Helsinki Stock
Exchange in January-September was EUR 3,537 million (1,510). The share
registered a high of EUR 33.31 in March and a low of EUR 19.00 in June. The
volume-weighted average price was EUR 25.40. The price of the share at the end
of the report period on 30 September 2006 was EUR 22.65 and the company had a
market capitalisation of EUR 3,150 million (2,596).
Rautaruukki Corporation's share capital was increased by EUR 312,885.00 as a
consequence of subscriptions made through the exercise of warrants under the
bond loan issued in 2003. A total of EUR 55,215.00 was transferred to the share
premium account. The increase in the share capital was entered in the Trade
Register on 8 August 2006. Following the increase, Rautaruukki's share capital
is EUR 236,419,841.50 and the total number of shares is 139,070,495. The figure
includes the treasury shares in the company's possession.
The warrants of the bond loan directed at Rautaruukki's personnel in 2003 were
admitted to public trading on the Helsinki Stock Exchange as from 24 May 2006.
There are a total of 1,400,000 share option warrants and each warrant confers
the right to subscribe for one share in the company. The subscription period for
the shares will end no later than on 23 May 2009.
Rautaruukki Corporation's Annual General Meeting held on 23 March 2006
authorised the Board of Directors to decide on buying back a maximum of
11,000,000 of the company's own Series K shares (7.92 per cent of the shares
outstanding). The Annual General Meeting furthermore authorised the Board of
Directors to decide on transferring a maximum of 13,592,697 Series K treasury
shares. During the report period the company has transferred a total of 810,316
of its own Series K shares (treasury shares) to persons covered by the Group's
share bonus system. On 30 September 2006 the company had a total of 1,785,381
treasury shares in its possession, and their market value was 40 million.
In addition to the above, the Board of Directors does not have a valid
authorisation to issue convertible bonds and/or bonds with warrants or to
increase the company's share capital.
Environmental compliance
The EU's internal emissions trading scheme, which was launched in 2005, includes
the following Rautaruukki sites: in Finland, the Raahe Steel Works and the steam
boilers of the Hämeenlinna Works. In Norway, a similar system has been
developed, and it covers the steel profile rolling mill located in Mo i Rana. In
the initial allocation of free emission rights, Rautaruukki received a total of
18.6 million emission rights, of which 3.2 million were transferred to Oy Ovako
Ab as part of the M&A transactions carried out in 2005, with 0.2 million being
transferred to BT Norway AS in connection with the sale of the steel
reinforcement business in the Nordic countries.
The confirmed volume of carbon dioxide emissions for 2005, excluding Ovako, was
4.83 million tonnes, of which the share for the businesses transferred to BT
Norway AS was 0.05 million tonnes. Last year the company's steel production was
adjusted in line with profitable demand, thereby also lowering carbon dioxide
emissions. EUR 2 million of emission rights were sold during the report period.
The difference between emission rights according to the initial allocation and
actual emissions as well as other resultant effects will be determined finally
only after the close of the three-year period from 2005 to 2007.
Improvements in cost-effectiveness
The aim of Ruukki United, Rautaruukki's project for harmonising and enhancing
ways of working is to achieve a permanent reduction in the level of costs of
about EUR 150 million by the end of 2008. Of these cost savings, EUR 39 million
had been implemented by the end of the report period.
The objective of the Ruukki United programme is also to free up permanently
about EUR 150 million of capital by the end of 2008. EUR 62 million of the
programme to reduce tied-up capital had been realised by the end of the report
period.
The effects which the programmes will have on staffing levels are to be
ascertained on a project-specific basis, and the reductions are expected to be
made primarily by way of retirement and relocation.
Events after the close of the report period
The Board of Directors of Rautaruukki Corporation has decided on the company's
new financial targets for the coming three years, and at the same time has
revised the company's dividend policy.
An annual target of 10 per cent has been set for growth in Rautaruukki's net
sales. The operating profit target has been raised from 7 per cent to 12 per
cent of net sales.
The target for return on capital employed has been raised from the previous
figure of 15 per cent to 20 per cent. The target set for gearing is to keep it
below 60 per cent instead of the previous 80 per cent.
Rautaruukki's dividend policy is to pay a dividend of 40 - 60 per cent of the
result for the fiscal year. The goal is a steadily increasing dividend that
takes into account the requirements for growth in the business.
Rautaruukki has decided to expand its service centre business in St. Petersburg
by an capital expenditure of some EUR 20 million in order to respond to western
and local customers' growing demand of materials and prefabrication services.
The share options of the bond loan with warrants directed at Rautaruukki's
personnel in 2003 were exercised to subscribe for a total of 194,751 Series K
shares during 9 August-18 October 2006. Rautaruukki Corporation's Board of
Directors approved the subscriptions made, which resulted in an increase in
share capital of EUR 331,076.70.
Near-term outlook
Economic growth in the Group's core market areas has remained strong and the
market situation in the main customer industries is good. The high season in the
construction industry is in the summer months, but demand is expected to hold up
well also in the latter part of the year. Customers in the engineering industry
have reported a good order intake, and the outlook is for stable demand. Within
steel products as well, demand is anticipated to remain robust, with prices
estimated to strengthen further in the fourth quarter. Costs of the raw
materials used in steel manufacture are expected to remain at the level seen in
the second half of 2005.
Full-year consolidated net sales in 2006 are estimated to exceed EUR 3.5
billion. The Ovako transaction is expected to be completed during the latter
part of the year, and the capital gain on it will be booked to the last quarter.
The company's cash flow is estimated to improve significantly in the latter part
of the year thanks to good profitability and the Ovako transaction. Fourth-
quarter operating profit is estimated to improve markedly compared with the same
period last year and the Group is well positioned to start the year 2007.
This Interim Report has not been audited.
Helsinki, 1 November 2006
Rautaruukki Corporation
Board of Directors
DIVISIONS
Ruukki Construction
EUR million I/05 II/05 III/05 IV/05 2005 I/06 II/06 III/06
Net sales 88 137 170 155 550 133 181 244
Operating profit 9 22 39 17 86 8 21 33
- % of net sales 10 16 23 11 16 6 12 14
Ruukki Construction's net sales in January-September 2006 totalled EUR 558
million (395). Net sales increased by more than 40 per cent on the same period
of last year driven largely by the effect of the acquisitions and the rise in
the proportion of integrated deliveries. The division's share of consolidated
net sales was 21 per cent (14). Operating profit was EUR 62 million (70). The
division's profitability improved towards the end of the report period, but
measured against the same period of last year, profitability was weakened by the
rise in the price of zinc, which is used in colour-coated products. The
development measures started at the beginning of the year have not yet risen the
profitability of PPTH to the targeted level.
There was brisk activity in the construction industry during the second and
third quarters. There was good demand for components, systems and integrated
systems alike, and deliveries increased in all market areas. In the Nordic
countries and the Baltic area, sales of components have held up well and
integrated deliveries have grown in volume. Deliveries for infrastructure
projects in the Nordic countries have likewise shown continued strength. There
has been buoyant growth in central eastern Europe, especially for integrated
deliveries, bolstered in large measure by the acquisitions and new capital
expenditure projects that have been carried out. In Russia and Ukraine, systems
and integrated deliveries represent an increased share of sales, alongside
growing sales of components.
The M&A arrangements carried out during the report period have increased the
Group's design and project know-how, delivery accuracy and the availability of
high-quality raw materials, especially in the growing markets of central and
eastern Europe. PPTH, the leading steel constructor in the Nordic countries, was
made a part of Ruukki Construction as from 1 January 2006, and Slovakia's
leading steel constructor, Steel-Mont, was added to the division on 1 April
2006. In May, Rautaruukki acquired AZST-Kolor's colour coating line in the city
of Antratsit, Ukraine. The acquisition of OOO Ventall, Russia's leading steel
constructer, was completed in June and Ventall was made a part of Ruukki
Construction as from 30 June 2006. In June, the Group started up a new factory
in Hungary to strengthen Rautaruukki's delivery and service capability for the
main components used in construction when making integrated deliveries.
In September, Rautaruukki announced it was launching major investment projects
with a total price tag of about EUR 50 million in central eastern Europe. The
total investment in a factory to be built in Ukraine is estimated at EUR 15
million and production is scheduled for start-up in the first quarter of 2008.
The factory to be built in Romania is estimated to have a total investment cost
of EUR 35 million and production is slated for start-up towards the end of 2007.
When the investments are completed, Rautaruukki will be able to increase
significantly its deliveries of components and integrated systems for commercial
and industrial construction to customers in Ukraine, Romania and Bulgaria.
Ruukki Engineering
EUR million I/05 II/05 III/05 IV/05 2005 I/06 II/06 III/06
Net sales 124 114 101 137 476 132 142 127
Operating profit 22 23 23 27 96 25 21 28
- % of net sales 18 21 23 20 20 19 15 22
In January-September 2006, Ruukki Engineering's net sales increased by 18 per
cent on 2005 and were EUR 400 million (339). Comparable net sales in January-
September 2005 amounted to EUR 311 million. Compared with this figure, growth in
the first three quarters of 2006 was 29 per cent. The higher net sales were
attributable both to the continued good market situation and the acquisition of
Syneco Industri AB that was made towards the end of 2005. The division's share
of consolidated net sales was 15 per cent (12; on a comparable basis: 11).
Operating profit was EUR 74 million (69; on a comparable basis: 69).
Order books are strong in all of Ruukki Engineering's customer industries.
Customers in the lifting, handling and transportation equipment industry had a
strong order intake, and this was reflected in the good demand for deliveries by
Engineering. Demand in the pulp and paper industry has held up well and there
has been good growth in the wind power plant market. In the shipbuilding and
offshore industry, the order intake is at a very good level.
Demand for parts, components and systems supplied by Ruukki Engineering has
continued to grow. Manufacturing capacity is being beefed up in line with the
increased demand and with an eye to boosting production efficiency. The new
assembly hall for operator cabin production at the factory in Kurikka went into
operation in the summer. Manufacturing capacity for operator cabins will
increase by about a third. In addition, production at the factory in Wroclaw,
Poland, will be expanded.
Demand for components and systems is enjoying buoyant growth, bringing in its
wake a growing need for special steels. Quenching capacity for steel plates will
be raised at the production units in order to ramp up deliveries of components
made from high-strength steels.
Ruukki Metals
EUR million I/05 II/05 III/05 IV/05 2005 I/06 II/06 III/06
Net sales 802 686 541 596 2625 591 604 514
Operating profit 180 147 69 91 486 77 87 89
- % net sales 22 21 13 15 19 13 14 17
Ruukki Metals' net sales in January-September 2006 totalled EUR 1,708 million
(2,029). Net sales decreased by 16 per cent. The decrease in net sales was
largely attributable to the non-inclusion of the units transferred to Ovako in
financial reporting as from 1 May 2005 and to the non-inclusion in reporting of
the Nordic reinforcing steel business as from 1 August 2006. Comparable net
sales in January-September amounted to EUR 1,541 million (1,606). The division's
share of consolidated net sales was 64 per cent (73). The corresponding figure
on a comparable basis was 62 (69). Operating profit was EUR 253 million (396).
Comparable operating profit was EUR 239 million (324). The decline in
profitability was attributable to the clear rise in raw material costs.
Demand for steel products has been buoyant in the main customer industries in
all the core markets and across Europe. Wholesalers have topped up their stocks
to the normal level. Prices of steel products rose further in the third quarter.
Average prices in January-September were on a par with the same period a year
earlier. Strong demand in the Nordic countries, accompanied by dips and peaks
from product to product, has led to delivery difficulties for certain products.
The surge in construction activity in central eastern Europe has particularly
fuelled demand for colour-coated sheet and plate products. Special products made
up an increased share of deliveries.
As part of the development of Ruukki Metals' business model, Rautaruukki sold
the steel service centre business which is located in Duisburg, Germany, and
mainly prefabricates thin sheet products as well as the property, plant and
equipment and inventories connected with the business. The steel service centre
and the approximately 75 people on its payroll were transferred to the
purchaser's employ on 1 September 2006.
Investments in increasing the delivery capability for ultra high-strength steels
are progressing according to plan. A new laser cutting line for large hollow
sections will go into operation at the steel service centre in Hyvinkää by the
end of 2007.
Ruukki Production
'000 tonnes I/05 II/05 III/05 IV/05 2005 I/06 II/06 III/06
Steel production 1176 982 765 888 3813 888 860 725
Steel production
at Raahe 716 715 614 701 2746 709 693 705
Steel output in January-September was 2,473,000 tonnes. The reinforcing steel
business that was sold to BT Norway AS in August was included in figures up to
the end of July 2006, after which Rautaruukki has steel production operations
only in Raahe. Steel output in Raahe during January-September amounted to
2,107,000 tonnes (2,045,000). The greatest demand was for heavy steel plates and
colour-coated strip products, and production of them ran smoothly. Production of
hot strip products fell short of targets.
The costs of raw materials used in iron manufacture were at the level seen in
the second half of last year. The price of zinc, which is used for coating thin
sheet, was double last year's price level. A cost trend that is more moderate
than world market prices for zinc has been ensured by taking out long-term
hedging contracts.
The production investments that were made increased the delivery capability for
ultra high-strength steels. The second phase of the modernisation of the hot
strip rolling mill's automation system was carried out in July. A new hot strip
coiler went into operation at the rolling mill in September, enabling it to coil
significantly thicker ultra high-strength steels. The building of direct
quenching equipment for heavy plates is progressing according to plans and part
of its commissioning was done in October. The entire equipment will be in
operation in summer 2007.
The colour-coating line in Antratsit, Ukraine, that was purchased in May went
into operation in July. Production has run in line with plans. In July-
September, 2,700 tonnes of steel were colour-coated in Antratsit. Capacity for
next year is estimated at 60,000 tonnes.
TABLES
Individual figures and grand totals presented in the tables have been rounded
off to full millions of euros from exact figures, which mean that when added
together or subtracted they will not always tally. The figures in the tables are
unaudited.
CONSOLIDATED PROFIT AND LOSS ACCOUNT (CONDENSED)
EUR million 7-9/06 7-9/05 1-9/06 1-9/05 2005
Net sales 885 812 2669 2764 3654
Other operating income 13 5 24 16 28
Operating expenses -719 -665 -2218 -2168 -2908
Depreciation -38 -37 -113 -118 -156
Operating profit 140 114 362 495 618
Financing income and expenses -6 -5 -19 -24 -30
Share of results in
associated companies 7 6 35 20 23
Profit before taxes 141 116 378 491 612
Taxes -36 -31 -89 -130 -157
Net profit 105 84 288 362 455
Attributable to:
Equity holders of the company 105 84 288 362 455
Minority interest 0 0 0 0 0
Diluted earnings per share, e 0,76 0,61 2,09 2,64 3,31
Basic earnings per share, e 0,76 0,62 2,11 2,66 3,35
Operating profit, % of net sales 15,9 14,1 13,6 17,9 16,9
CONSOLIDATED BALANCE SHEET (CONDENSED) 2006 2005 2005
EUR million 30 Sep 30 Sep 31 Dec
ASSETS
Non-current assets 1562 1501 1476
Current assets
Inventories 556 582 534
Trade and other receivables 629 528 528
Cash and cash equivalents 38 83 163
2785 2694 2701
EQUITY AND LIABILITIES
Equity
Capital attributable to the
Company's equity holders 1619 1399 1497
Minority interest 1 0 1
Non-current liabilities
Interest bearing 220 412 372
Other 217 236 194
Current liabilities
Interest bearing 228 149 132
Trade payables and other liabilities 501 498 505
2785 2694 2701
CASH FLOW STATEMENT (CONDENSED)
EUR million 1-9/06 1-9/05 1-12/05
Net profit 288 362 455
Adjustments 179 265 333
Cash flow before working capital changes 467 627 788
Change in working capital -95 -57 0
Financing items and taxes -167 -109 -137
Cash flow from operations 205 461 652
Cash flow from investing activities -62 -81 -133
Cash flow before financing 143 380 519
Dividends paid -191 -109 -109
Other net cash flow from financing -76 -247 -307
Change in cash and cash equivalents -124 24 103
KEY FIGURES 1-9/06 1-9/05 1-12/05
Net sales, Me 2669 2764 3654
Operating profit, Me 362 495 618
- % of net sales 13.6 17.9 16.9
Profit before taxes, Me 378 491 612
- % of net sales 14.2 17.8 16.7
Net profit, Me 288 362 455
- % of net sales 10.8 13.1 12.5
Return on capital employed*, % 26.2 35.7 32.8
Return on equity *, % 25.3 38.4 34.7
Equity ratio, % 59.5 52.3 56.0
Gearing ratio, % 25.3 34.1 22.8
Interest-bearing net debt, Me 410 477 341
Equity per share, e 11.85 10.27 10.98
Personnel on average 13,063 11,800 11,684
Number of shares 139,070,495 138,886,445 138,886,445
- not counting own shares 136,768,798 136,293,748 136,293,748
- diluted, average 137,749,903 135,870,405 137,377,120
* Based on previous 12 months
STATEMENT OF CHANGES IN EQUITY 1-9/2006
Me
Attributable to equity holders of the Company
ShareFair value Trans- Re-
Share premium and lation tained Minority
capital account other differ- earn- Total interest
reserves ences ings
EQUITY 1.1. 236 220 31 -5 1016 1497 1
Cash flow hedging
Increase (hedging reserve) 27 27
Deferred taxes -7 -7
Share-based compensation 2 2
Treasury shares disposal -4 6 2
Change in translation difference 1 1
Dividend distribution -191 -191
Net profit 288 288
EQUITY 30.9. 236 220 49 -4 1119 1619 1
STATEMENT OF CHANGES IN EQUITY 1-9/2005
Me
Attributable to equity holders of the Company
ShareFair value Trans- Re-
Share premium and lation tained Minority
capital account other differ- earn- Total interest
reserves ences ings
EQUITY 1.1 236 220 4 -2 670 1126 1
Cash flow hedging
Increase (hedging reserve) 24 24
Deferred taxes -6 -6
Share-based compensation 3 3
Change in minority interest -1
Change in translation difference -2 -2
Dividend distribution -109 -109
Net profit 362 362
EQUITY 30.9. 236 220 25 -4 923 1399 0
NET SALES BY DIVISION
Me 1-9/06 1-9/05 1-12/05
Ruukki Construction 558 395 550
Ruukki Engineering 400 339 476
Ruukki Metals 1708 2029 2625
Group management and other units 2 2 3
Consolidated net sales 2669 2764 3654
OPERATING PROFIT BY DIVISION
Me 1-9/06 1-9/05 1-12/05
Ruukki Construction 62 70 86
Ruukki Engineering 74 69 96
Ruukki Metals 253 396 486
Group management and other units -26 -39 -50
Consolidated operating profit 362 495 618
NET SALES BY QUARTER
Me I/05 II/05 III/05 IV/05 I/06 II/06 III/06
Ruukki Construction 88 137 170 155 133 181 244
Ruukki Engineering 124 114 101 137 132 142 127
Ruukki Metals 802 686 541 596 591 604 514
Group management
and other units 0 2 0 1 0 1 0
Consolidated net sales 1014 939 812 889 856 928 885
OPERATING PROFIT BY QUARTER
Me I/05 II/05 III/05 IV/05 I/06 II/06 III/06
Ruukki Construction 9 22 39 17 8 21 33
Ruukki Engineering 22 23 23 27 25 21 28
Ruukki Metals 180 147 69 91 77 87 89
Group management
and other units -10 -12 -17 -11 -15 -2 -9
Consolidated operating profit 201 180 114 123 95 127 140
NET SALES BY QUARTER (PRO FORMA) EXCLUDING UNITS
TRANSFERRED TO OVAKO AND NORDIC REINFORCING BUSINESS
Me I/05 II/05 III/05 IV/05 I/06 II/06 III/06
Ruukki Construction 88 137 170 155 133 181 244
Ruukki Engineering 103 107 101 137 132 142 127
Ruukki Metals 571 561 474 522 521 523 497
Group management
and other units 0 2 0 1 0 1 0
Consolidated net sales 761 807 745 815 786 848 868
OPERATING PROFIT BY QUARTER (PRO FORMA) EXCLUDING UNITS
TRANSFERRED TO OVAKO AND NORDIC REINFORCING BUSINESS
Me I/05 II/05 III/05 IV/05 I/06 II/06 III/06
Ruukki Construction 9 22 39 17 8 21 33
Ruukki Engineering 21 24 23 27 25 21 28
Ruukki Metals 135 122 67 85 71 79 90
Group management
and other units -10 -12 -17 -11 -15 -2 -9
Consolidated operating profit 154 156 112 117 89 119 141
NET SALES BY AREA
% of net sales 1-9/06 1-9/05 1-12/05
Finland 31 29 29
Other Nordic countries 32 30 30
Central eastern Europe 15 11 12
Other western Europe 20 27 26
Other countries 2 3 3
CONTINGENT LIABILITIES 2006 2005 2005
Me 30 Sep 30 Sep 31 Dec
Mortgaged real estates 26 27 29
Given as pledges 5 0 19
Collateral given on behalf of
associated companies 2 16 3
others 2 6 2
Leasing and rental liabilities 127 146 141
Other financial liabilities 9 1 4
VALUES OF DERIVATIVE CONTRACTS 30 Sep 2006
Me Nominal value Fair value
Cash flow hedges included
in hedge accounting
Interest rate derivatives
Interest rate swaps 25 0.2
Zinc derivatives
Forward contracts 34,875* 36.6
Electricity derivatives
Forward contracts 1,597** 25.5
Derivatives not included
in hedge accounting
Interest rate derivatives
Interest rate swaps 100 0.6
Foreign currency derivatives
Forward contracts 372 -0.4
Options
Bought 60 -0.3
Sold 60 0.8
120 0.5
* tonnes
** GWh
CHANGES IN PROPERTY, PLANT AND EQUIPMENT
Me 1-9/06 1-9/05 1-12/05
Book value at the beginning of the period 1033 1192 1192
Increases 79 57 84
Increases through acquisitions 51 9 19
Decreases -8 -9 -15
Decreases through divestments -42 -114 -105
Depreciation -101 -110 -144
Exchange differences -1 8 4
Book value at the end of the period 1011 1034 1033
TRANSACTIONS WITH RELATED PARTIES (ASSOCIATED COMPANIES)
Me 1-9/06 1-9/05 1-12/05
Sales to associated companies 21 39 59
Purchases from associated companies 66 47 56
Non-current receivables
at the end of the period 0 39 39
Trade receivables and other
receivables at the end of the period 6 12 13
Trade creditors and other liabilities
at the end of the period 7 6 6
INVESTMENT COMMITMENTS* after
Me 30 Sep 2006
Maintenance investments 37
Development investments and
Outlays on special products 118
Total 155
*Investment commitments include the estimated costs of projects that have
received a go-ahead permit.
INFORMATION ON ACQUISITIONS
Me Fair values booked Book value
at acquisition before acquisition
Acquisition cost 149 149
including conditional purchase price 29 29
Acquired entities'
assets and liabilities (book value)
Non-current assets 63 44
Current assets
Inventories 25 25
Trade receivables and other receivables 34 34
Cash and cash equivalents 8 8
Total assets 130 111
Non-current liabilities
Interest-bearing 28 23
Other 2 2
Current liabilities
Interest-bearing 7 7
Other 43 39
Total liabilities 79 71
Net assets 51 40
Acquisition cost 149 149
Goodwill 98 109
Acquisition cost paid in cash 120 120
Cash flow from acquired subsidiaries 8 8
Cash flow from acquisitions 112 112
Includes following acquisitions: PPTH Steelmanagement Oy, Steel-Mont a.s., AZST-
Kolor CJSC
and OOO Ventall.
The acquisitions have been recorded on a preliminary basis in the manner
permitted under IFRS 3. The determination of OOO Ventall's fair value of assets
and liabilities is still incomplete when the interim report is published.
ADDITIONAL INFORMATION
Sakari Tamminen, President and CEO, tel. +358 20 592 9075
Mikko Hietanen, CFO, tel. +358 20 592 9030
Rautaruukki Corporation
Taina Kyllönen
VP, Corporate Communications
Rautaruukki supplies metal-based components, systems and integrated systems to
the construction and mechanical engineering industries. The company has a wide
selection of metal products and services. The company has operations in 23
countries and employs 12,000 people. Net sales in 2005 totalled EUR 3.7
billion. The company's share is quoted on the Helsinki Exchanges (Rautaruukki
Oyj: RTRKS). The Corporation has used the marketing name Ruukki since 2004.
www.ruukki.com